Golar LNG Limited preliminary fourth quarter and financial year 2020 results

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(Neutral)

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(Positive)

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Golar LNG reported Q4 operating revenues of $118.7 million and net income of $9.5 million, while transactions with New Fortress Energy Inc. are set to enhance its corporate structure, realizing a combined enterprise value of $5 billion. The company will receive $131 million in cash and 18.6 million Class A shares in NFE worth around $910 million. A share buyback program of up to $50 million has been authorized to enhance shareholder value. With a focus on strengthening the balance sheet, Golar aims for improved results in the upcoming quarters.

Positive

Q4 total operating revenues of $118.7 million.
Net income of $9.5 million despite a 15% revenue decline year-over-year.
Merger with New Fortress Energy has a combined enterprise value of $5 billion, strengthening corporate structure and liquidity.
Expected cash proceeds of $131 million and NFE shares valued at $910 million from the merger.
Share buyback program of up to $50 million approved.
Financial flexibility enhanced by $128 million in cash and proceeds from LNG Croatia sale.

Negative

15% decline in Q4 total operating revenues year-over-year.
62% decrease in net income compared to Q4 2019.
Operating income dropped by 34% year-over-year.
77% fleet utilization is down from 90% achieved in Q4 2019.

02/25/2021 - 07:15 AM

Delivering on our commitment to shareholders with two transformative transactions

Iain Ross, CEO, Golar LNG, said:

“Golar is pleased to report Q4 total operating revenues of $118.7 million, adjusted EBITDA¹ of $78.0 million and net income of $9.5 million, driven by another quarter of uninterrupted commercial uptime in FLNG and a Q4 Adjusted TCE¹ for the shipping fleet at $51,800 per day.

Previously announced sales of Hygo Energy Transition Ltd. (“Hygo”) and Golar LNG Partners LP (“Golar Partners” or “the Partnership”) to New Fortress Energy Inc. (“NFE”), in transactions with a combined enterprise value of approximately $5 billion, deliver on Golar's commitment to simplify its corporate structure and crystallize value to Golar shareholders. The combination of NFE, Hygo and Golar Partners will also create the leading LNG downstream distribution company. Golar's combined net proceeds of 18.6 million Class A shares in NFE and $131 million in cash, will, together with the $100.3 million of equity raised in December, significantly strengthen Golar's balance sheet.

The successful delivery of the FSRU LNG Croatia (formerly Golar Viking) to LNG Hrvatska d.o.o. (“LNG Hrvatska”) released a further $51.7 million of liquidity between December 2020 and Q1 2021. This project was completed on time, on budget and in spite of significant COVID related constraints and is a credit to Golar's project and operations teams.”

Financial Summary

(in thousands of $)	Q4 2020	Q4 2019	% Change	YTD 2020	YTD 2019	% Change

Total operating revenues	118,684	139,048	(15)%	438,637	448,750	(2)%
Adjusted EBITDA¹	78,031	93,388	(16)%	278,676	254,880	9%
Operating income	45,505	68,896	(34)%	125,653	60,659	107%
Net income/(loss) attributable to Golar LNG Ltd	9,456	24,768	(62)%	(272,227)	(211,956)	28%
Dividend per share	—	—	—%	—	0.150	100%
Adjusted net debt¹	2,418,770	2,474,947	(2)%	2,418,770	2,474,947	(2)%

Q4 highlights and recent events

Financial:

$75 million drawn down against FLNG Gimi debt facility. Total of $300 million drawn down as at December 31, 2020.
Golar Seal financing extended to January 2022.
Raised $100.3 million net proceeds from a public follow-on offering of 12,067,789 common shares.
Executed a new $100 million credit facility backed by Hygo shareholding (will be transferred to NFE shareholding post closing of Hygo and NFE transaction).
Repaid $150 million facility secured by Hygo shareholding and $30 million margin loan secured by Golar Partners shareholding.
Sold the FSRU LNG Croatia (formerly Golar Viking) to LNG Hrvatska releasing $51.7 million of liquidity between December 2020 and Q1 2021.
Entered into separate and independent merger agreements for the proposed sale of both Hygo and Golar's interest in Golar Partners to NFE. Golar to receive a total of $131 million of cash and 18.6 million Class A shares in NFE in combined merger consideration upon closing of both transactions, expected within 1H 2021.
18.6 million Class A NFE shares valued at $910 million as of February 24, 2021, the equivalent of $8.28 per Golar LNG share.
On February 24, 2021, the Partnership's common unit holders voted to approve the proposed merger agreement with NFE.
Share buyback program of up to $50 million of Golar's common stock approved by the Board.

Shipping:

Q4 2020 average daily Time Charter Equivalent (“TCE”)¹ earnings of $48,800 for the fleet.
Shipping results adversely impacted by: (i) waiting time ahead of longer-term charters, and (ii) a mechanical failure that reduced one spot vessel's ability to capitalize on the stronger winter shipping market.
Inclusive of loss of hire insurance proceeds receivable in respect of the above-mentioned vessel, an adjusted Q4 TCE¹of $51,800 was achieved for the fleet. The TFDE adjusted TCE¹ for the quarter was $54,100.
Utilization at 77%, down on the 80% achieved in Q3 2020 and the 90% realized in Q4 2019.
Inclusive of days covered by loss of hire insurance, Q4 2020 adjusted utilization was 82%.
Revenue backlog¹ of $193 million as at December 31, 2020.
Approximately 77% of 2021 available days covered by charter contracts.
Downside risk, particularly through seasonally weak spring and summer months materially reduced through charters that secure increased utilization and fixed rate coverage.

FLNG:

FLNG Hilli Episeyo off-loaded its 52nd cargo, with 100% commercial uptime maintained.
Executed additional documentation required to remove cap on gas reserves available for future liquefaction by FLNG Hilli Episeyo.
Invoiced Hilli Episeyo charterer an additional $8.0 million for 2019 and 2020 overproduction.
Constructive discussions ongoing with customer on proving up additional reserves and increasing utilization of Hilli Episeyo.
FLNG Gimi conversion project on track and on budget.
Continued to refine Mark III 3.5 - 5.0mtpa designs with Korean yard to develop position on the healthy pipeline of new FLNG opportunities.
Designs for smaller units with a shorter lead time to production also being explored.

Hygo Energy Transition Ltd:

Golar and Stonepeak Infrastructure Partners entered into a merger agreement for the proposed sale of 100% of Hygo to NFE.
Pursuant to the transaction, Golar will receive 18.6 million NFE Class A shares and $50 million in cash for its 50% shareholding in Hygo.
The transaction represents a Hygo common equity value of approximately $2 billion, in line with contemplated Hygo IPO valuation expectations.
Completion of the transaction is subject to the receipt of certain approvals and third-party consents and the satisfaction of other customary closing conditions.
After completion, Golar will have a ~9% shareholding in NFE, a larger and more diversified LNG downstream business with significant growth prospects, spurred by a strong business pipeline and access to attractive financing.

Outlook

LNG Shipping:

We expect the Q1 2021 fleet TCE¹ to be around $60,000 per day, with utilization of around 90% based on fixtures to date and prevailing spot market conditions. Despite the record spot rates recorded by the market in January, Golar's shipping strategy will continue to prioritize longer term utilization over short-term opportunities. Approximately 77% of 2021 available days are now covered. We do retain some exposure to seasonal and other potential upside by virtue of some index linked charters and spot availability within our shipping portfolio.

FLNG:

We will continue to focus on Hilli Episeyo operations and will pursue our dialogue with Perenco and SNH on potential solutions to prove up more reserves and increase throughput of the vessel. A conditional agreement with Perenco has been entered into that may allow for a drilling campaign to commence within Q1 2021. If drilling were to commence before the end of Q1 2021, additional throughput could commence in 2022. With Brent oil prices having recently exceeded $60, additional Brent linked operating cashflow can also be expected under the terms of the current contract.

On Gimi, our project focus is in Singapore on conversion productivity whilst complying with safe working under COVID-19 restrictions. The project remains on schedule, on budget and the 5th dry dock is on track to commence in Q1 2021.

We will continue to work with development opportunities for new FLNG projects utilizing both Mk I conversion and Mk III new build technologies. Smaller capacity solutions based on modular production technology that offer the prospect of a significantly shorter lead time to first production will also be explored further.

Following the re-emergence of strong returns in the upstream segment Golar will revisit opportunities to use its unique FLNG technology and operational experience to increase its potential upstream exposure. This can be achieved by virtue of the current Hilli oil price kicker or by more direct exposure. The target remains to capture more of the spread between well and wire and the strategy is in line with that articulated when OneLNG was established with Schlumberger in 2016. The collapse in oil and gas prices at that time caused Golar to focus on the build out of its downstream business which has now been successfully established following the proposed merger with NFE.

Corporate:

The entry into merger agreements resulting in the eventual sales of Hygo and Golar Partners to NFE represent significant steps toward simplifying the group structure, crystallizing value and strengthening the balance sheet. With $128 million of unrestricted cash on hand as at December 31, 2020, a further $37 million released from the sale of the LNG Croatia in Q1 2021 and $131 million of cash proceeds expected upon closing of the proposed sales of Hygo and Golar Partners, Golar's balance sheet will be significantly strengthened. Together with the 18.6 million NFE shares with a market value of $910 million as of February 24, 2021, Golar is now well-positioned to refinance the 2022 maturing convertible bond, complete all project CAPEX obligations, and target attractive growth prospects. The Golar Board does not intend to create a long-term holding company of other publicly traded entities. The Board will therefore focus on solutions that give shareholders direct exposure to the underlying assets and thereby minimize any holding company discounts.

In order to capture the significant discount to book value/underlying value, Golar will also explore opportunities to separate the FLNG business. With a unique fast-track, low cost technical LNG production platform, $3.4 billion (Golar share) in contract earnings backlog¹, and attractive growth prospects, the Board is of the opinion that there is also significant hidden value in this business segment.

Supported by increased financial flexibility following the proposed NFE transactions and a continuing disparity between the share price and the underlying value of the business, the Board has approved a share buyback program of up to $50 million of the Company’s common stock. After expiry of the 90 day lock-up period for the NFE Class A shares to be received upon consummation of the merger agreement for the proposed sale of Hygo, the Board will revert with a plan for how the value of this investment can best be transferred to Golar shareholders, either directly and or indirectly. The Board of Golar sees significant strategic upside in the NFE business, particularly as the company has taken a leading role in the global downstream distribution of LNG, supported by strong long-term cash flow contracts.

Driven by a stronger performance of the shipping fleet and consistent operations from FLNG Hilli Episeyo, Golar's expects a solid improvement in Q1 results relative to Q4. Influenced by a potential $773 million illustrative gain on disposals¹ of Hygo and Golar Partners to NFE, results for 1H 2021 are also expected to be materially ahead of prior periods.

Financial Review

Business Performance:

2020

Oct-Dec

Jul-Sep

(in thousands)

Shipping

FLNG

Corporate and other

Total

Shipping

FLNG

Corporate and other

Total

Total operating revenues

50,727

62,489

5,468

118,684

35,582

54,524

5,046

95,152

Vessel operating expenses

(14,629)

(11,677)

(26,217)

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FAQ

What were Golar LNG's Q4 2020 financial results?

Golar LNG reported Q4 2020 operating revenues of $118.7 million, net income of $9.5 million, and an adjusted EBITDA of $78 million.

How will the merger with New Fortress Energy affect Golar LNG?

The merger will simplify Golar's corporate structure, providing $131 million in cash and 18.6 million NFE shares valued at approximately $910 million.